A Conversation About Special Access

On Wednesday, IIA Founding Co-Chair Bruce Mehlman moderated a panel at the TIA Spring Policy Summit, titled “Special Access Re-Regulation.” The robust discussion explored the FCC’s regulation of the business data services market. Below are a handful of highlights:

Berge Ayvazian, Wireless 20/20: We have seen significant competition in the special access field between companies. This competition has shaped the underlying infrastructure on which wireless exists. We must take advantage of this opportunity to apply what we have learned in the last 10 years to allow the market to evolve around the competition already happening in the marketplace. In most markets, the quality of service being delivered by an ILEC and a CLEC is the same. We need to change the way we impose regulations on the business broadband market.

Patrick Brogan, USTelecom: Competition policy has been evolving since 1996 in the business broadband marketplace. The special access market has been competitive in telecom for a very long time. The guiding policy over the past fifteen years has been to encourage facilities-based competition and this should continue to be our goal.

Fred Campbell, Tech Knowledge: I find it difficult to believe that price regulation is needed when we have seen healthy competition. During the net neutrality proceeding, Chairman Wheeler was certain that there would be no price regulation. Business services is where competition started. Consumers do not need price regulation. Something is not right about this proceeding.

Hal Singer, PPI: If you push prices down from competitive levels you will see inefficiencies at all levels. If you are going to seize someone’s property, though, you are smart to wait until they have upgraded their network. You do not want to join the old copper network; you want them to already be upgraded to fiber. Prices are not at monopoly levels. By 2014, 42% of commercial buildings were outfitted with fiber. In 2009, it was just 23%. If you step in now and impose price regulations you could do some bad things. The notion that people are competing on a non-level playing field does not make sense.

Ayvazian: We all agree there is no basis on which to introduce price regulations.

Campbell: In my view, price regulation is the last option and worst possible way to address market issues.

Singer: Before Gigi Sohn was at the FCC, she was at Public Knowledge. One of Public Knowledge’s ultimate objectives is increased regulation and unbundling. There are a lot of forces at play here that are pushing them towards the CLEC agenda.

Brogan: There is a group in the CLEC industry that benefits from price regulation and increased access to network facilities. It is easier to lease these from the incumbents than it is to build their own facilities.

Campbell: Their complaint is that, to get a certain discount, you need to commit to a 7-year term. I do not see how that is inherently problematic when facilities must be built. These contracts are long-term for a reason.

Brogan: I would continue to not regulate carrier Ethernet and rationalize regulation. Do not lower prices. This will discourage investment. That is the source of innovation within the broadband industry. Facilities-based competition is more self-sustaining.

Campbell: We need to stop moving to the left of Europe on communications policy. Many of the same consumer groups supporting price unbundling loved to point to Europe as an example of how broadband policy in the United States policy should move. In 2013, the EU’s version of the FCC drafted a lengthy report with data on developments in the EU markets and concluded that investment in the EU is lower due to unbundling. The reason is that unbundling discourages investment. If an entity has regulated access at government regulated rates, they have profit without the risk of losing investment dollars. Their conclusion was that, beyond where cable was, there was no increased investment. Now Chairman Wheeler wants to do it anyways.

Singer: If you want to maximize broadband deployment, we should be free of regulations.

Campbell: Chairman Wheler uses the word “competition” a lot, but when he uses it, he means something completely different than I do when I say competition.

Singer: When you say competition three times, it is static and not dynamic. Chairman Wheeler’s competition does not mean anything.

Campbell: Our FCC just makes up competition in market segments as if it is a new thing. Europe has imposed standards on how to impose these regulations. This has given them enormous power to do unhealthy things for a viable and competitive communications market.

Singer: We are not going to get to a Communications Act rewrite until we solve the net neutrality problem. The idea is to figure out a way to give the FCC authority to regulate allegations of discrimination on a case-by-case basis. Republicans should go forward on a broadband subsidy so we do not have to raise taxes on the back of broadband users.

Campbell: If we want to talk about politicized decision-making, let’s look at net neutrality. One of the arguments raised in favor of Title II regulations were the number of comments received in favor of it. It did not matter who these were from, but simply the volume of responses. The question we all asked was the relevance of each of these comments. There are arguments about the FCC’s political form of decision-making.

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